Can You Become Wealthy by Acting Rich and Not Paying Off Your Debt?
A reader brought an article that was published on Entrepreneur.com to our attention and I honestly thought the article was a joke. I kept looking at the url to see if by any chance it was a re-direct from The Onion. The advice in the article is so awful that I couldn’t move on without providing feedback on our blog.
Scientists say that you need five positive interactions to overcome a negative one. I hope that another four bloggers will also respond with solid advice so that we can overcome the poor advice stemming from this article. Let’s save some confused souls from the agony of debt slavery!
I’m referring to an article written by a contributor for Entrepreneur titled: 7 Ways to Be Debt-Free for the Rest of Your Life. This advice doesn’t work for the majority of folks out there. The author kind of means well in the article by trying to bring a dose of optimism but it’s embedded in bad advice for the average American.
The article begins with the author telling a story on how he struck a conversation with a Nordstrom sales clerk while buying a suit. The conversation was going well, according to him, until she started talking about money and didn’t sound smart.
Here’s what she said, according to his recount of the interaction:
“I don’t know how people eat out every day. It’s too expensive. I can only do it once in a while, but not on a daily basis. I’d rather cook.” After cringing, the author asked her, “Why do you say it’s too expensive?”
She continued, “I have all these college loans. They just weigh me down. It seems like I can’t do anything until I get out of debt. I basically have two full-time jobs and three kids to feed.”
The author goes on to explain how he clearly understood her dilemma. After all, he paid off his college and credit card bill of $50,000 each, last year, with ease.
He also says “if you keep thinking about debt, you will attract it. However, if you think about wealth, you will attract it, too.” I agree that we should think about wealth and how to acquire it, but that doesn’t mean we shouldn’t think about the debt that we carry, and how to get rid of it. As a matter of fact, you should think about getting rid of that debt and visualize how your life will be without it, not ignore it. The “out of sight, out of mind” is a great technique if you want to stay in debt forever.
He then moves on to explain his concept further: “ When you think about debt, you’re inviting thoughts of despair, poverty, and the feeling of being overwhelmed. This forces you to think about putting in long hours and makes you believe that you’ll be paying your bills endlessly, which is a painful and miserable experience.”
I think that the best thing you can do is realize what situation got you into debt in the first place. If this invites thoughts of poverty because suddenly you realize that you were living above your means or acting like rich middle class while having a negative net worth, then this should be your motivation to get out of debt. And yes, you might put in longer hours at work or take an additional job to get rid of it, but it won’t be forever.
Make a definite sacrifice and reach the lifetime reward of becoming debt free. By the way, you’ll be attracting wealth as your net worth will still start to increase as you get rid of liabilities. Get motivated by seeing your net worth escalate!
After an explanation of his concept, the author moves on to provide his seven quick tips to getting out of debt for the rest of your life. On the contrary, I think these tips are a recipe for staying in debt. That being said, I’m going to leave his “7 quick tips” headers mainly untouched and state why I think that these tips will more likely keep the average Americans in debt for the rest of their lives instead of freeing them.
1. Think About Wealth, Not Debts
The author’s advice: “Since you think about money every day of your life, you might as well have good thoughts about it. When you think about gaining money, you’ll be more creative. If you think about debts, you’ll die.”
The Enchumbao Way: Not thinking about the accumulating debt is what probably got you into trouble. You’re going to die anyway, so might as well think of creative ways to build income streams to pay debt off. Think about debt and don’t stay with your arms crossed waiting for divine intervention, do something about it. Not thinking about debt, as Daniel suggested, won’t make it go away.
Also, telling people that they’ll become debt free by ignoring debt is like telling young people that they’ll become a Bill Gates by dropping out of college. According to Bloomberg, 80% of entrepreneurs who start businesses fail within the first 18 months. The odds are against you. How many people do you think became millionaires like Daniel by ignoring debt until they can pay them off all at once with a stroke of a pen?
2. Pay Your Bills Willingly
The author’s advice: “The next time you get a bill, fine, or fee, pay it willingly. If you pay it painfully, you’re admitting two things: 1) That money is hard to come by, and 2) You don’t enjoy the services that you’re getting.”
The Enchumbao Way: Pay all your bills and feel the pain when you pay a fine or an unnecessary fee. Who enjoys getting fines or late fees? Learn from your mistakes, so that it doesn’t happen again. If you just pay for these unnecessary expenses without doing a mental check, they’ll become recurring expenses.
Money coming from active income is hard to come by because if you can’t work, you don’t get paid. I’m going to steal a line from Mr. Money Mustache on this one: you should punch yourself in the face every time you have to pay for any kind of fines or late fees.
Also the money that you make today is not the money that you’ll make tomorrow. You often hear people waste money and say “I’ll make that money again”. Well, not really, that money is gone. Tomorrow’s money is new money, which instead of being allocated differently, is just replacing the money that is gone.
3. Bless Everything You Have
The author’s advice: “Appreciating your substance only allows you to have more of it. You’re basically telling the universe or God, “More of this, please.” Take inventory of everything you have and appreciate it. You’ve got to take what you get to get more of what you want.”
The Enchumbao Way: I agree that we should always be appreciative of what we have and be ambitious, but at some point you should be able to know when you’ve gotten enough. More flat screen TVs and square footage won’t necessarily make you happier. Don’t believe me? Ask the folks who lost their homes to foreclosure during the housing crash.
4. Get Away From Broke People
The author’s advice: “There’s a ton of people who will share their gospels about wealth. Stay away from these folks. Many people are charlatans when it comes to earning money. Seek richer friends instead. They’ll help you get to where you need to be.”
The Enchumbao Way: We agree that you should stay away from charlatans, but beware of the richer friends that are just trying to keep up with the Joneses. Seek frugal-minded individuals that are living fulfilling lives. These people go around with a glow in their faces, not shiny new vehicles. You’ll be surprised to find out that they’re truly the millionaires next door.
5. Don’t Speak of Debt
The author’s advice: “Words have prospering power, but they also have poverty power. If you’re sharing your poverty (or debts) with others, you’re enslaving people with your thoughts. Instead, speak wealthy thoughts.”
The Enchumbao Way: A big motivation for others that are in debt is to see how friends and family are working their way out of debt. Sharing their experience also makes them more accountable. Talking about debt and poverty are two different things. We have many individuals that make a ton of money and live in perpetual debt.
Speaking about eliminating debt and going through the process does evolve into wealthy thoughts. As your debt starts to disappear, you start thinking about what to do with the income that was allocated to paying off debt. You have a blank slate, can invest at full throttle and become a producer, instead of a consumer.
6. Go to Wealthy Places
The author’s advice: “Go and test drive a Rolls Royce and get the experience of a lifetime. You may even want to visit a few million-dollar mansions once per month. Surrounding yourself with prosperity will make you richer. You’ll start asking yourself, ‘How can I get this?’”
The Enchumbao Way: Is this a sales pitch for high luxury items? Dear Nordstrom sales clerk, you can’t even afford to eat out right now, please don’t add to the debt pile by trying to frequent your wealthy customers’ hangouts. That would be suicidal to your finances. And to the rest of us, surrounding ourselves with high luxury vehicles and mansions might make us feel richer, as we get accustomed to a life of high spending and have a taste of luxury, but it will not make us richer. Investing instead of spending is what you gets us in the Millionaire Club faster. And instead of asking ourselves “How can we get this?” we should be asking ourselves: “Would this add any value to our long-term happiness?”
7. Buy Luxury Goods
To better illustrate our point, let’s split this “advice” into two sections.
The author’s advice: “When you purchase items from the luxury market, no matter how small it is, you will automatically feel richer. For instance, every week, I went to Pier 1 to buy gold forks. As I began to accumulate more superior products, my self-esteem increased, which affected my bank account.”
The Enchumbao Way: Is this an April fool’s joke? How can someone’s way out of debt be buying a weekly luxury item from Pier 1? Instead of shopping, find out what makes you truly happy. Once you do, you’ll find better ways to raise your self-esteem than by going to an expensive store to buy an item per week. Stop spending what you don’t have and you’ll see your bank account affected in a positive way, caching caching…
The author’s advice: “Earning wealth is a more pleasurable experience than paying off debts, don’t you think? After all, you’ll be earning more money this way and enjoying the ride in the process. When it’s all done, you’ll have fun stroking big checks to the loan department. In the meanwhile, focus on accumulating wealth!”
The Enchumbao Way: By doing it the author’s way, you’re betting that we’ll become rich enough to be able to pay off our debts with one single check. So if we have credit cards charging high interest, is the author telling us that we’re better off holding from paying it off and spending on luxury items until we become rich enough to pay them off? This makes no financial sense. Pay off that debt as soon as possible!
Enchumbao’s Advice for the Nordstrom Sales Clerk
Although we have limited info on her situation to create a financial picture, what kind of advice can we give this sales clerk? From the article we can deduct that she:
- Cooks at Home
- Eats out once in a while
- Has school loans
- Works two full-time jobs
- Has three kids
- Would like to afford things, such as eating out every day (not recommended!)
Dear sales clerk,
You shouldn’t be doing anything that requires spending extra money and only spend on what you need for your essential expenses such as food, housing, transportation and clothing, until you get rid of those school loans. Don’t try to emulate what others that act rich around you do, when they’re probably living from paycheck to paycheck.
With three kids, I’m assuming you have a cable or satellite service to keep them entertained while you work. Beware of the flat screen babysitter that is loaded with salespeople. Keep those salespeople out of your living room. They’ll be telling your kids what cereal to eat, what toys to ask for during Christmas and what clothes or gadgets they “need” for school. Cut the cord and get a cheap service like Netflix and you’ll have affordable entertainment without the ads.
Advertisers know how to work their magic to get you to open your wallet. The more you can limit your family’s exposure to them, the better off you will be. Find activities to do with your children that require very minimum to no spending. The Simple Dollar blog has 102 listed here. You seriously don’t need to spend money to have fun.
Also, teach your children how to cook, so that they can learn a valuable skill that would serve them for life, and it can free up more of your time. Eating out on a daily basis is an unenviable habit that would keep you working forever, especially with three kids. Plus, you’ll all be healthier by eating home-made meals!
Working two full-time jobs is not a walk in the park, and I applaud you for taking that on. As for making more money to acquire wealth, if you want to stay in your field, you should:
- Network with coworkers from different departments.
- Always be extremely nice to the customers and be willing to go the extra mile for them.
- Fix broken processes and provide suggestions for improvement.
- Keep learning more about the business.
- Let management know that you’re looking for new and challenging opportunities.
By doing the above, you’ll be setting yourself up for promotions and will be able to take advantage of career opportunities that might present themselves.
Here’s what a career progression could look like in retail:
And if you’re willing to work even harder and smarter, and pursue a new career, here are other fields within Nordstrom that you can aim for: E-commerce, Merchandising & Planning, Product Development Technology, Strategy, Marketing, Finance, Human Resources, Credit and Operations.
By opening your mind to opportunities, you’ll be able to grow your career and invite wealth into your life. At some point, one full-time job might even provide you with the income of both current jobs.
Up your game and there’ll be no limits to where you can go. As your income increases, continue sending the extra income to your debtors. Celebrate every milestone, even if it’s with a glass of water!
People don’t make it to the top just because they’re smarter–they keep trying. They don’t give up, and by staying with a problem longer, they find solutions. Once your debts are paid off, and you find yourself with more wealth, buy the most luxurious item that money can buy – time! Buy enough of that life energy and you can also retire early. 🙂